EDITORIAL: High stakes as Irba ‘reviews’ CEO hire
Jenitha John’s baggage is that for nine years until last May, she headed the audit committee of Tongaat Hulett which oversaw one of SA’s worst-ever accounting scandals
If you were in any doubt about how critical the auditing industry is, the FM’s cover story on page 22 details how the profession was instrumental in so much of the corruption that has robbed SA’s citizens of their wealth.
SAA is just one example. Despite flaws identified by previous auditor Deloitte, PwC and Nkonki took over as auditors in 2012 and reported that everything was in tip-top shape. It was only in 2017, when the auditor-general took over SAA’s audit, that it picked up that PwC and Nkonki had somehow missed eight major misstatements over the previous years.
So who do people complain to in cases like this? Irba — the Independent Regulatory Board for Auditors. In the case of SAA, Irba found that PwC had "failed to disclose noncompliance with legislation" and hit it with a R200,000 fine.
However, Irba itself — the final port of call for those who’ve been stiffed by auditors — finds itself at a critical juncture. Bernard Agulhas, who had been CEO for 12 years and led the (seemingly interminable) case against Deloitte for its handling of the African Bank audit, left this week after his contract wasn’t renewed.
Jenitha John was picked as Irba’s new CEO from a list of 267 candidates, and has been in the role for a month. However, John’s baggage is that for nine years until last May, she headed the audit committee of sugar company Tongaat Hulett which oversaw one of SA’s worst-ever accounting scandals, where everything from the value of the sugarcane in the fields, to its expenses, turned out to be wrong.
This is why the Organisation Undoing Tax Abuse (Outa) lobbied finance minister Tito Mboweni last month to "review" John’s appointment, arguing that it was "highly inappropriate". The only problem: the Irba board which appointed her had finished its term on May 9.
Finally, Mboweni last week appointed a new Irba board, whose first order of business will now be to "review" John’s appointment.
The new appointees include former JSE president Roy Andersen, former MMI Holdings finance director Preston Speckmann, ex-Brait executive Jesmane Boggenpoel, former auditor-general Shauket Fakie, SA Reserve Bank economist Nombulelo Gumata, Wits accounting school head Nirupa Padia and Icasa councillor Thembeka Semane. However, Mboweni also reappointed three members of the former Irba board that had appointed John: lawyer Iqbal Motala, Madoda Petros and Martie Janse van Rensburg.
Agulhas told the FM this week that he hoped the new board’s review of John’s appointment would be "independent, in that the directors who were part of the original decision to appoint her won’t participate in the review". He said the board should also "look at all the facts relevant to this issue, and not just what’s given to them".
Sensibly, Irba’s old-new directors are well aware of this imperative.
Motala says that having been part of the original decision, he’ll obviously recuse himself from decisions around the review. "There’s no question about that," he told the FM.
John told the FM she has offered her unconditional support to the new board. "[I] will respect whatever approach and outcome they reach in relation to my appointment," she said.
It’s just as well that Irba’s new board members are well-equipped, since the stakes couldn’t be higher. As Outa puts it, Irba has a major role to play in "addressing the growing concerns of financial reporting irregularities in SA". For everyone who’s been a victim of poor auditing in SA — from the investors in Steinhoff and Tongaat, to the public whose taxes went to support SAA — this decision matters.
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